|
Q.
I am interested in starting my own local pizza restaurant. Where can I obtain information on business
related rules of thumb for this industry such as: volume vs. population in a specific radius, delivery
vs. sit down/take out, POS systems, average cost per square foot on rental space, etc?
Q.
Our store is in a small community of approximately 11,000 people where we share the market with 2 major
pizza chains. Our deliveries are only 30%. How do we increase this figure?
Q.
Should we start delivery? What are the positives and negatives to delivery? ie: Insurance? Liability?
Other cost? Product quality when delivered?
Q.
How do you teach your employees to estimate delivery or pick-up times?
Q.
What is the average cost to deliver a pizza?
Q.
I am interested in starting my own local pizza restaurant. Where can I obtain information on business
related rules of thumb for this industry such as: volume vs. population in a specific radius, delivery vs. sit down/take
out, POS systems, average cost per square foot on rental space, etc?
A. Hi James,
Q.
Our store is in a small community of approximately 11,000 people where we share the market
with 2 major pizza chains. Our deliveries are only 30%. How do we increase this figure? (We are the only one that charges
a delivery fee of $1 with no minimum order.) A. Thirty percent of gross sales attributed to delivery is not shabby. I think the national average is around 30 - 35%. If you were my client, I would ask you for a little more information to assist you in maximizing your delivery potential.
After answering these questions I could then develop a plan of attack than would beat the competition at their own game. When Big Dave's Pizza was threatened by THE delivery chain a while back I developed 29 minutes or FREE policy. They were toast. You are absolutely correct in charging for the service. There is no such thing as a free lunch. Right now the dine in and carry out customers subsidize the cost of delivery. The cost is skyrocketing and I predict will never come down. If the fuel doesn't get you the wages will. I'll be addressing delivery in my seminars in Las Vegas soon. I want to be the person that evangelized the thought of eliminating, FAST - FREE - DELIVERY. Think about it, the timing is perfect. We can blame it on OPEC. I started charging for delivery during the Gulf War and blamed it on Saddam. Worked for me! I noticed that your town is close to Principia College. I think you would do very well if you aggressively marketed to the college students as well as the faculty. My shop was located a mile from a large USAF Base. We did small ads in the base newspaper. Looked for ways to become a major presence and helped with charitable events. We were forbidden by law to do door hangars and go door to door. Since the Air Cops (Security Police) carried M-16 machine guns, we didn't push the issue. I found that this was a great place to hire from and the demographics were great. I would push Principia Pizza Party Packs, and have my phone number in every dorm room. Desk calendars are great with perimeter coupons. Refrigerator magnets and mouse pads would work too. Pizza is an impulse food, more impulses more sales. I found that if I hired from the Base/College I got lots of information from that employee on what was happening and I tried to have a presence there. Faculty love to have pizza parties for the students. I'd create a inter-departmental memo or e-mail to the staff offering parties at just over cost to bring high awareness to my shop. That's the perfect time to personally hand out the freebies and press the meat, face to face. People like to do business with people they know and like.
Q.
Should we start delivery? What are
the positives and negatives to delivery? ie: Insurance? Liability?
Other cost? Product quality when delivered? A. How big is your dining room? Twenty seats, sixty seats or more? By offering delivery to your customers you could increase your dining room to twenty square miles with tens of thousands of seats! Why Deliver?
Q. How do you teach your
employees to estimate delivery or pick-up times? A. The first step in determining times is to establish a benchmark. What that means is under normal operations, the standard for pick up would be 15 minutes and delivery would be 30-35 minutes. Every time a customer orders these are the times they will be quoted. Easier said than done. The questions you have to answer are:
This is how and why I standardized my operation. For 15 years I had very little significant competition. I quoted 20-30 minute pick up and "within the hour" for delivery. My customers accepted that. Then the fastest pizza delivery company known to man opened up across the street. They blew me away with their efficiency. They made me look bad and I lost market share to them. Nowadays customers want it now, or they want it free. They will no longer put up with slow. They didn't want to hear my excuses about how busy we were, we had no-show drivers and so forth. They just switched to another pizza store. People will compromise quality for speed. The only time my service failed was during prime time, 5-10 PM. Thursday - Saturday. I took a step back and determined that I needed to streamline my pizza making process. It was taking my cooks 20-25 minutes to get the pizzas out in a rush. The drivers weren't the problem, they were doing their best. The kitchen needed help. Throwing more help at the problem didn't work. The solution was: in anticipation of the rush my pizza makers pre prepped up 20-30 pizzas. They were pre formed, sauced cheesed and slipped into vertical racks. When the phone was hung up and the time of order written on the ticket we had the pizzas in the oven in less than one minute. Topping is a quick process. After an 8 minute bake it and one minute chop and box, the order was usually waiting for the driver in less than 10 minutes. We installed a door bell that was rung whenever a new order was out in the heated delivery shelf to alert the drivers that an order was up. They checked the ticket for completeness and were on their way. Just as they departed the building they looked up to a large digital clock, subtracted time of order from the current time and announced in a loud voice "18 out." The manager responded by saying "Thank You." The entire kitchen knew if we were losing control or maintaining. As soon as we hit over 20 minutes out the manager analyzed the situation and generally made a cook a temporary driver. The determination was made at the beginning of the shift. The cook or prep person took a few deliveries to help keep us from getting into the weeds and disappointing our customers. When I hire I look for people who can be cross trained so after a few months they can Make it- Bake-it & Take-it. We also had a large clipboard that was in full view of the kitchen and phone people. I had four pieces of paper that displayed 30, 35, 40, or 45. When we couldn't hold to less than 30 minutes the manager switched the paper to 35, 40 or whatever he determined that the real time was going to be. When we got out of the weeds he switched back to 30. We got the entire crew so pumped up over never losing control and using high levels of team work to be the best and the fastest we decided to stick it to the competition. We advertised and proclaimed that if your pizza wasn't at you door in less than 29 minutes, it was free. I held that guarantee until the day my competitor closed and left town. After that we relaxed a bit but still instill a high sense of urgency in every order. Whatever is measured is improved. My rule of thumb for delivery radius is, if the driver can leave the shop, drive under or at the speed limit, make the money transaction at the door and return to the shop in under 20 minutes we'll go there. If not, the customer will be given a choice to pick up or rendezvous with a driver at a pre set location. This way we split the distance driven and don't say no to the customer. Remarkably we do this a lot. A couple hundred orders a month go to Big Dave meeting places. After I installed RapidFire the entire system became even more streamlined. A Driver Screen tracks every delivery in process and the screen turns to red as soon as we have an order that is older than 20 minutes. My drivers have also shaved off a couple of minutes of in store time with the speed of Driver Dispatch.
Q. What is the average cost to deliver a
pizza? A. Great question. I conducted my first cost analysis per delivery during the Gulf War. Big Dave’s offered Fast, Hot, Free Delivery for 15 years. When Desert Storm got into full gear, gas prices went up, up, and up. Just like what’s happening now. I pay my drivers a little over minimum wage per hour. On top of that I reimburse them .50 a delivery to cover their fuel. My drivers were feeling the pinch at the gas pumps. They collectively asked me if I would raise the .50 to .75 per delivery until the gas crisis was over. I couldn’t refuse them; it was the right thing to do. At that time I was delivering 4000 deliveries per month. By raising the bar a quarter per delivery times 4000, in affect increased my cost of doing business $1000 per month. It looked like I was going to take a personal $12,000 annual loss in personal income. This was a problem for my accountant. Even consultants need a little help from time to time. After explaining the problem to him I challenged him to go through my P & L statements and advise me how to get past this problem. Shave a little here and a little there and all would be well. He told me that since we scrutinized every line item that I would have to personally bear the loss. This was unacceptable to me. What alternatives did I have? His answer was simple, charge for deliveries. But, every competitor in my area offered free delivery and I was afraid that if I was the first one to charge, or the only one to charge, my customers would abandon me. He thought I was wrong and asked me three questions.
The answers were NO, NO and I don’t know. At that time we did the math. I went back to my records and added up the dollar value of the last 10,000 deliveries. After arriving at that figure, I computed how many total dollars were spent to provide that service. I added up the sum of total delivery wages, matching social security, delivery fees, unemployment, workman's comp and non-owned vehicle insurance costs. I divided that number into 10,000 and came out with $2.51 per average delivery. It cost me $25,100 to deliver 10,000 orders. This was a shock to both of us. Since my drivers are hourly employees, whenever they are not on the road they are very productive in house and do a lot of prep and cleaning, I still have to have them on the clock all of the time. We were competing with the big boys and offered 29-minute delivery guaranteed or free. Within two days I had distinction of being the first pizzeria to charge $1.00 for delivery. I was nervous about losing a ton of customers to my competition. I dropped 500 deliveries a month and had them all back in 90 days. The neat thing was gas dropped to normal levels in the next 90 days. I rolled back the drivers to .50 and added an additional .50 a delivery for the next five years. When Little Caesars entered the delivery arena several years back I decided to increase my fee to meet theirs. Now $2.00 per delivery is the norm in my town. The true cost now is close to $3.00 per delivery so my dine-in and carry out customers still subsidize the service somewhat. To offset this all of my people are cross-trained to make-it, bake-it and take-it. But that’s another question. |
Products & Services
